In Dahl v. Dahl, 2015 UT 23, the Utah Supreme Court held that Kim Dahl had an enforceable interest in a Nevada asset protection trust that was established by her husband, Charles Dahl, during the marriage with marital property.
The trust instrument expressly stated that the trust was irrevocable. However, it also stated: “Settlor reserves any power whatsoever to alter or amend any of the terms or provisions hereof.” The trust instrument provided that the trust was governed by Nevada law.
The Court first held that it would interpret the trust according to Utah law – not Nevada law – because Utah has a strong public policy in favor of the equitable distribution of marital assets upon divorce, and application of Nevada law would deny the district court the ability to equitably divide the marital assets.
The Court then held that, under Utah law, the trust was revocable because Charles Dahl, as settlor, retained the power to amend the trust in any manner. Because the trust was funded with marital assets, the Court then concluded that Kim Dahl was also a settlor of the trust and therefore also had the power to revoke the trust and withdraw assets from the trust. The trust assets were thus subject to equitable distribution in the divorce proceeding.
In a footnote, the Court explained:
“Were we to construe the Trust as irrevocable, it would create a serious conflict between trust law and divorce law in Utah. The question of whether a spouse could create an irrevocable trust in which he or she placed marital property, thereby frustrating the equitable distribution of property in the event of a divorce, is not before us in this case. Accordingly, we take no position on a likely outcome of such conflict. Rather, we bring the potential pitfalls to the Legislature’s attention.”
For more information about revocable trusts in Utah, see “Basic Utah Estate Planning Information” on this website.
Rust Tippett is the author of this blog post.
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This blog post in no way creates an attorney-client relationship between the reader and either Robert S. (Rust) Tippett or Bennett Tueller Johnson & Deere, LLC. The reader should consult with his or her own estate planning attorney regarding his or her particular circumstances.